In recent news has been Martin Shkreli’s testimony before the House Oversight Committee. Most articles focus on Shkreli taking the 5th on most questions, very few actually provide the actual questions. Such is news these days, the actual data is left out in favor of editorializing. The fact is the questions asked by the committee had no constructive purpose, Shkreli was called before the committee for the purpose of humiliating him.
That’s not what I wanted to talk about though. This story about the testimony gets a little more into pharmaceutical pricing practice:
Ex-CEO Shkreli smirks, pleads Fifth at hearing on drug price hikes | Fox News
In a broader sense, I think the core issue boils down to whether the free market is working as intended to offer value to the consumer. The same mechanism that is not working as intended also explains why the Affordable Care Act is the opposite of what is truly needed to make medical care affordable. Competition drives value. But ACA reduces competition, especially because for many ACA takes away the option with the best value - not buying insurance - and instead takes away the incentive for insurers to provide value to a consumer who otherwise would spend their money on something else.
Similarly, the pharmaceutical industry has two problems working against any incentive to provide value. At the start, the fact is that FDA regulations on research and what must be done before a drug can be offered to the market represents an enormous capital investment which must be carried over an extended timeframe with very real risk of no pay-off. The industry enjoys, and this is the second problem, generous protection from competition as a means of trying to offset the risk and capital investment involved.
When Turing bought Daraprim and raised the price, what they did was probably not actually illegal, and probably not shocking to anybody that understands the nature of capital and risk in an FDA regulated industry. But it was shocking to the average consumer who judges the data in a consumer frame of mind.
Here’s my idea, and I wanted to hear what everyone thinks because it’s somewhat of a departure from less government, but I think in this case it’s a necessary departure. What if government takes over the research part of pharmaceuticals completely and funds it with a flat percentage tax on all pharmaceuticals, which could be waived on Medicaid, and licensing fees in the first X years on new medications. Manufacture then becomes a separate and competitive industry. I see the research being an entity not unlike NASA.
Thoughts? I’m thinking it utilizes free-market strategy where it works and it utilizes government where profit motive does not work but where it is a necessity for the public good, not unlike the manner of government having the military role to defend our nation’s sovereignty or providing roads… It’s just a little hard to for me to reconcile the concept of a growth of the federal government.